The ACIT, 2(1), Bhopal V. M/s. Kshetriya Gramin Bank, Bhopal

ITA 694/IND/2013

• Counselvise Citation: 69422714 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 02-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I.T.A.NO.694/IND/2013 A.Y. : 2005-06 ACIT, KSHETRIYA GRAMIN BANK, 1(2), BHOPAL VS ACTING THROUGH SUCCESSOR VIZ. SATPURA KSHETRIYA GRAMIN BANK, MANGALWARA, BHOPAL APPELLANT RESPONDENT P.A.N. NO A AAJK0211F APPELLANT BY SHRI R. A. VERMA, SR. DR RESPONDENT BY NONE DATE OF HEARING : 17.08.2015 DATE OF PRONOUNCEMENT : 01 .0 9 .2015 -: 2: - O R D E R PER GARASIA, J.M. THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, BHOPAL, DATED 24.09.2013 FOR THE ASSES SMENT YEAR 2005-06. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A BANKING COMPANY INDULGED IN LENDING AND DEPOSIT OF MONEY. THE ASSESSEE IS A STATUTORY BODY WITH MAJOR STAKE O F GOVERNMENT OF INDIA HAVING 50 % SHARES, CENTRAL BAN K OF INDIA HAVING 35 % SHARES AND THE BALANCE 15 % SHARES WITH M.P. GOVERNMENT. THE ASSESSEE FURNISHED ITS RETURN OF' INCOME FOR A.Y. 2005-06 ON 20.10.2005 DECLARING NIL INCOME, AFTER CLAIMING THE DEDUCTION U/S 80P OF RS.4,81,88, 525/-. THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/ S 143(2) OF THE INCOME TAX ACT, 1961 AND ASSESSMENT U/S 143(3) WAS COMPLETED ON 08/10/2007 DETERMINING THE TAXABLE INC OME OF THE ASSESSEE AT RS.59,40,283/-. THE AO NOTICED THAT THE ASSESSEE HAD CREDITED INCOME ON ACCOUNT OF PROFITS EARNED ON SALE OF INVESTMENT IN SHARES/SECURITIES OF RS.59,40 ,283/-. AS -: 3: - PER THE AO, THE ACTIVITY OF THE BANKING COMPANY GEN ERALLY REVOLVES AROUND TAKING DEPOSITS FROM PUBLIC/ INSTIT UTIONS AND EXTENDING LOANS. THE MAIN SOURCE OF INCOME OF ANY B ANKING COMPANY IS INTEREST AND COMMISSION/ EXCHANGE AND BROKERAGE AND TO THAT EXTENT THE INCOME OF THE BANK IS JUSTIFIED FOR CLAIM OF DEDUCTION U/S 80P. BUT THE I NCOME FROM INVESTMENT IN SHARES/ SECURITIES DEFIES THE GENERAL BANKING ACTIVITY AND IS, HENCE, NOT AN INCOME FROM BANKING ACTIVITIES. THEREFORE, THE AO CONCLUDED THAT THE ASSESSEES CLA IM OF DEDUCTION U/S 80P WAS NOT ALLOWABLE TO THE EXTENT O F PROFITS SHOWN TO HAVE BEEN EARNED FROM INVESTMENTS IN SHARE S/ SECURITIES OF RS.59,40,283/-. ACCORDINGLY, THE AO D ISALLOWED THE ASSESSEES CLAIM FOR DEDUCTION U/S 80P OF RS. 5 9,40,283/- AND ADDED THE SAME TO THE TOTAL INCOME. 3. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) DELETED THIS ADDITION BY OBSERVING AS UNDER :- 3.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. AS FAR AS STATUS O F THE -: 4: - APPELLANT IS CONCERNED, THE AO HAD RIGHTLY TREATED THE STATUS OF THE APPELLANT AS ARTIFICIAL JURIDICAL PE RSON. IT MAY BE NOTED THAT THERE IS NO STATUS NAMED AS COOPERATIVE SOCIETY IN SECTION 2(31) OF THE ACT. EVEN A COOPERATIVE SOCIETY, WHICH IS REGISTERED UNDER COOP ERATIVE SOCIETY ACT HAVING AN INDEPENDENT STATUS, COMES WIT HIN THE AMBIT OF ARTIFICIAL JURIDICAL PERSON. THEREFO RE, THE AO HAD RIGHTLY ASSESSED THE STATUS OF THE APPELLANT AS ARTIFICIAL JURIDICAL PERSON. THE BOARD CIRCULAR N O.319 DATED 11.08.1982 PROVIDES THAT PROFITS AND GAINS OF THE REGIONAL RURAL BANK (RRB) SHALL BE DEEMED TO BE INC OME DERIVED BY A COOPERATIVE SOCIETY FOR THE LIMITED PU RPOSE OF APPLICABILITY OF PROVISIONS OF SECTION 80P. HOWEVER , THE STATUS OF THE RRB IS ARTIFICIAL JURIDICAL PERSON AS PER SECTION 2(31) OF THE ACT. THEREFORE, NO INTERFERENC E IS REQUIRED ON THIS ISSUE. IT IS ALSO NOTICED THAT THE APPELLANT, KSHETRIYA GRAMIN BANK, WAS AMALGAMATED IN SATPURA KSHETRIYA GRAMIN BANK W.E.F. 01.06.2006. THEREFORE, UPTO THE DATE OF AMALGAMATION, INCOME OF THE APPELLANT H AD TO BE SEPARATELY ASSESSED IN THE HANDS OF KSHETRIYA GR AMIN -: 5: - BANK. HENCE, THE AO HAD RIGHTLY ASSESSED THE INCOME IN THE NAME OF KSHETRIYA GRAMIN BANK FOR F.Y.2004-05 RELEVANT TO A.Y.2005-06 I.E. FOR THE PERIOD PRIOR T O THE DATE OF AMALGAMATION W.E.F. 01.06.2006. HOWEVER, AS REGARDS ALLOWABILITY OF DEDUCTION U/S 8 0P ON THE PROFITS ON THE SALE OF INVESTMENT IN GOVERNMENT SECURITIES, IT IS NOTICED THAT THE ISSUE IS COVERED IN FAVOUR OF THE APPELLANT BY THE DECISION OF HON'BLE ITAT IN THE APPELLANTS OWN CASE IN IMMEDIATE PRECEDING A.Y. 20 04- 05, WHEREIN THE HON'BLE ITAT IN ITA NO.56/IND/2008 AND CO NO.72/IND/2008 ORDER DATED 19.06.2009 HELD THAT APPELLANT WAS ENTITLED FOR DEDUCTION U/S 80P (2)(A) (I) ON THE PROFITS EARNED ON SALE OF GOVERNMENT OF INDIA (GOI) SECURITIES. THE RELEVANT PORTION OF THE ORDER OF TH E HON'BLE ITAT IS REPRODUCED AS UNDER :- 7. CONSIDERING THE ABOVE PROVISIONS OF BUSINESS OF BAN KING COMPANIES THE PROFIT EARNED BY THE ASSESSEE ON SALE OF GOI SECURITIES ARE TO BE CONSIDERED AS EXEMPT U/S 80P(2 )(A)(I) OF -: 6: - THE IT ACT. IN SUPPORT OF THE ABOVE, RELIANCE IS PL ACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF BI HAR STATE CO-OPERATIVE BANK LTD. VS. CIT 39 ITR 114. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 8. CONSEQUENTLY, APPEAL OF THE REVENUE IS DISMI SSED. THE FACTS INVOLVED IN THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS INVOLVED IN IMMEDIATE PRECED ING ASSESSMENT YEAR 2004-05. IN THE YEAR UNDER CONSIDER ATION ALSO THE APPELLANT HAD MADE INVESTMENT IN THE GOVERNMENT OF INDIA SECURITIES (SLR SECURITIES) AND EARNED PROFIT OF RS.59,40,283/- ON THE SALE OF GOVERNMENT OF INDIA SECURITIES, WHICH WAS INEXTRICABLY LINKED WITH THE BUSINESS OF BANKING. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T HE HON'BLE ITAT, WHICH IS BINDING ON CIT (A), IT IS HELD THAT APPELLANT WAS ELIGIBLE FOR DEDUCTION U/S 80P ON THE INCOME OF RS.59,40,283/- EARNED ON SALE OF GOVERNMENT SECURIT IES. THE AO IS, ACCORDINGLY, DIRECTED TO ALLOW DEDUCTION U/S 80P OF RS.59,40,283/-. 4. NOBODY APPEARED ON BEHALF OF THE ASSESSEE. WE HAVE HEARD THE LD. SENIOR D.R. LOOKING TO THE FACTS AND -: 7: - CIRCUMSTANCES OF THE CASE, WE FIND THAT THE LD. CIT (A) HAS FOLLOWED THE ASSESSEES OWN CASE WHEREIN THE TRIBUN AL HAS HELD THAT IN THE BUSINESS OF BANKING COMPANY PROFIT EARNED BY THE ASSESSEE ON SALE OF GOI SECURITY ARE TO BE CONS IDERED AS EXEMPT U/S 80P(2)(A)(I) OF THE ACT. WE FIND THAT TH E LD. SENIOR D.R. COULD NOT BRING ANY CONTRARY DECISION. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 17 TH AUGUST, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 1 ST SEPTEMBER, 2015. CPU* 278